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SHREE CEMENTS
RECOMMENDATION: ACCUMULATE
TARGET PRICE: RS.1908
FY12E P/CEPS: 6.5X
q Company's revenues for Q4FY11 and full year FY11 were inline with our
estimates led by improvement in cement realizations as well as sale of
power. Revenues reported a growth of 13% YoY for Q4FY11 but declined
by 3% YoY for FY11.
q Operating margins witnessed a sequential improvement led by cement
price hikes but are lower than last year due to steep increase in overall
costs. However, margins were better than our estimates.
q Net profit growth was impacted by higher depreciation and interest
charges but was boosted by tax credit.
q We marginally tweak our estimates to factor in lower cement volumes,
higher power sales as well as higher depreciation charges. Depreciation
charges would increase going forward due to commissioning of power
plants during FY12. Operating margins during FY12 would be impacted
downwards due to lower margins in the power division.
q At current market price of Rs 1877, stock is trading at 6.5x P/CEPS and
5.9x EV/EBITDA for FY12. We value the company based on the average of
6.5x P/CEPS and 6x EV/EBITDA and arrive at a revised price target of
Rs.1908 (Rs 1948 earlier) on FY12 estimates. We continue to maintain
ACCUMULATE on the stock.
Revenue growth led primarily by improvement in cement
realizations
n Company's revenues for Q4FY11 and full year FY11 were inline with our
estimates led by improvement in cement realizations as well as sale of power.
Revenues reported a growth of 13% YoY for Q4FY11 but declined by 3% YoY
for FY11.
n Cement dispatches including clinker stood at 2.88 MT and 10.2 MT for Q4FY11
and FY11 respectively, marginally better than our estimates. However, during full
year FY11, dispatches of the company were impacted by lower than expected
demand growth in company's key markets. We expect dispatches to improve
going forward due to expected improvement in overall cement demand during
FY12.
n Cement realizations during Q4FY11 witnessed an increase of 15.7% QoQ and
stood at Rs 3299 per tonne as against Rs 2850 per tonne seen during Q3FY11.
Realizations for the full year stood at Rs 3132 per tonne, down by 6.4% YoY.
n We marginally reduce our volume estimates for the company for FY12 and
expect cement revenues of Rs.39.3bn for FY12.
n Company's capex plan for the thermal power plant is on track and first phase of
150MW of thermal power plant is likely to commission by June, 2011 and
second phase by Sep, 2011. Along with this, company has also commissioned a
1.5MT clinker grinding unit near Jaipur, Rajasthan thereby taking its total cement
capacity to 13.5 MT.
n Power segment revenues for Q4FY11 witnessed a jump of 121% % YoY and
power sales stood at 257.4 mn units in Q4FY11. For full year, power sales stood
at 524 mn units. During FY11, power sales volume was impacted by low
demand of merchant power as well as sharp fall in the merchant power rates.
However, due to expected commissioning of 300Mw of thermal power plants
during FY12, we expect power volumes to jump significantly from the current
levels. Management expects to sell nearly 2 bn units during FY12, we however
expect power sales to be nearly 1.7 bn units during FY12.
n Post tweaking our estimates for lower cement volumes and higher power sales,
we expect revenues to grow by 35% for FY12.
Operating margins better than our estimates
n Operating margins witnessed a sequential improvement led by cement price
hikes but are lower than last year due to steep increase in overall costs.
However, margins were better than our estimates.
n Margins stood at 27.7% and 25.2% for Q4FY11 and full year FY11 respectively.
EBITDA/tonne for cement division was impacted by steep increase in power and
fuel costs due to increase in pet coke prices and higher raw material costs.
n Margins have declined in the power division due to low merchant power rates.
n Post tweaking our estimates, we expect margins to be 22.6% for FY12.
Net profit growth impacted by higher depreciation
n Net profit growth was impacted by higher depreciation and interest charges but
was boosted by tax credit.
n Due to steep increase expected in depreciation charges in FY12, we now expect
net profits to be Rs 1.25 bn for FY12.
Valuation and recommendation
n At current market price of Rs 1877, stock is trading at 6.5x P/CEPS and 5.9x EV/
EBITDA for FY12.
n We value the company based on the average of 6.5x P/CEPS and 6x EV/EBITDA
and arrive at a revised price target of Rs 1908 (Rs 1948 earlier) on FY12
estimates.
n We continue to maintain ACCUMULATE on the stock.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
SHREE CEMENTS
RECOMMENDATION: ACCUMULATE
TARGET PRICE: RS.1908
FY12E P/CEPS: 6.5X
q Company's revenues for Q4FY11 and full year FY11 were inline with our
estimates led by improvement in cement realizations as well as sale of
power. Revenues reported a growth of 13% YoY for Q4FY11 but declined
by 3% YoY for FY11.
q Operating margins witnessed a sequential improvement led by cement
price hikes but are lower than last year due to steep increase in overall
costs. However, margins were better than our estimates.
q Net profit growth was impacted by higher depreciation and interest
charges but was boosted by tax credit.
q We marginally tweak our estimates to factor in lower cement volumes,
higher power sales as well as higher depreciation charges. Depreciation
charges would increase going forward due to commissioning of power
plants during FY12. Operating margins during FY12 would be impacted
downwards due to lower margins in the power division.
q At current market price of Rs 1877, stock is trading at 6.5x P/CEPS and
5.9x EV/EBITDA for FY12. We value the company based on the average of
6.5x P/CEPS and 6x EV/EBITDA and arrive at a revised price target of
Rs.1908 (Rs 1948 earlier) on FY12 estimates. We continue to maintain
ACCUMULATE on the stock.
Revenue growth led primarily by improvement in cement
realizations
n Company's revenues for Q4FY11 and full year FY11 were inline with our
estimates led by improvement in cement realizations as well as sale of power.
Revenues reported a growth of 13% YoY for Q4FY11 but declined by 3% YoY
for FY11.
n Cement dispatches including clinker stood at 2.88 MT and 10.2 MT for Q4FY11
and FY11 respectively, marginally better than our estimates. However, during full
year FY11, dispatches of the company were impacted by lower than expected
demand growth in company's key markets. We expect dispatches to improve
going forward due to expected improvement in overall cement demand during
FY12.
n Cement realizations during Q4FY11 witnessed an increase of 15.7% QoQ and
stood at Rs 3299 per tonne as against Rs 2850 per tonne seen during Q3FY11.
Realizations for the full year stood at Rs 3132 per tonne, down by 6.4% YoY.
n We marginally reduce our volume estimates for the company for FY12 and
expect cement revenues of Rs.39.3bn for FY12.
n Company's capex plan for the thermal power plant is on track and first phase of
150MW of thermal power plant is likely to commission by June, 2011 and
second phase by Sep, 2011. Along with this, company has also commissioned a
1.5MT clinker grinding unit near Jaipur, Rajasthan thereby taking its total cement
capacity to 13.5 MT.
n Power segment revenues for Q4FY11 witnessed a jump of 121% % YoY and
power sales stood at 257.4 mn units in Q4FY11. For full year, power sales stood
at 524 mn units. During FY11, power sales volume was impacted by low
demand of merchant power as well as sharp fall in the merchant power rates.
However, due to expected commissioning of 300Mw of thermal power plants
during FY12, we expect power volumes to jump significantly from the current
levels. Management expects to sell nearly 2 bn units during FY12, we however
expect power sales to be nearly 1.7 bn units during FY12.
n Post tweaking our estimates for lower cement volumes and higher power sales,
we expect revenues to grow by 35% for FY12.
Operating margins better than our estimates
n Operating margins witnessed a sequential improvement led by cement price
hikes but are lower than last year due to steep increase in overall costs.
However, margins were better than our estimates.
n Margins stood at 27.7% and 25.2% for Q4FY11 and full year FY11 respectively.
EBITDA/tonne for cement division was impacted by steep increase in power and
fuel costs due to increase in pet coke prices and higher raw material costs.
n Margins have declined in the power division due to low merchant power rates.
n Post tweaking our estimates, we expect margins to be 22.6% for FY12.
Net profit growth impacted by higher depreciation
n Net profit growth was impacted by higher depreciation and interest charges but
was boosted by tax credit.
n Due to steep increase expected in depreciation charges in FY12, we now expect
net profits to be Rs 1.25 bn for FY12.
Valuation and recommendation
n At current market price of Rs 1877, stock is trading at 6.5x P/CEPS and 5.9x EV/
EBITDA for FY12.
n We value the company based on the average of 6.5x P/CEPS and 6x EV/EBITDA
and arrive at a revised price target of Rs 1908 (Rs 1948 earlier) on FY12
estimates.
n We continue to maintain ACCUMULATE on the stock.
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